Ballooning welfare bill outpaces other developed nations despite Labour’s reforms
31 March 2025
Daily Telegraph
Britain has seen the fastest rise in people claiming health and disability benefits in the rich world, analysis by the Institute for Fiscal Studies (IFS) shows.
The share of Britain’s working-age population claiming welfare because of sickness or disability rose by more than a quarter between 2019 and 2023. This follows official projections that indicate Labour’s reforms will not be enough to reverse a post-lockdown surge.
The increase in claims has been much faster than in other developed nations, including Denmark and France, where overall government spending is much higher.
The cost of those claims has surged even faster, with official data showing the cost of these benefits has climbed 50pc from £37bn just before the pandemic to £56.9bn in the current financial year.
Health-related benefits now account for 40pc of all spending on working-age welfare, up from 22pc in 2010 and 31pc just before the pandemic.
Tom Waters at the IFS said spending on health benefits as a share of the economy was on course to keep rising.
He said: “The share of the UK’s national income that goes on health-related benefits for working-age people is not unusual compared to other well-off countries. What is unusual is the recent growth: spending on these benefits increased from £37bn just before the pandemic to £56bn now.”
No other country has seen any remotely comparable trends, and if the UK’s trajectory continues, our spending on these benefits will start to drift towards the top of the pack internationally.
Last week, the Office for Budget Responsibility (OBR) said changes to who can claim disability benefits and cuts to Universal Credit would shave £4.8bn off the welfare bill by the end of the decade.
However, its forecasts show that spending on these benefits is still on course to rise to £72.3bn by the end of the decade.
Mr Waters said: “The plans recently announced by the government amount to a significant cut in the size of the incapacity and disability benefit system – though the OBR’s forecast is that these will only serve to slow the rise, rather than put it into reverse.”
The rise in claimants comes in stark contrast to countries like Australia and the US, where claims as a proportion of the workforce have fallen since the pandemic.
Mr Waters suggested a squeeze on living standards in the wake of lockdown may have incentivised people to claim incapacity benefits that pay more and do not require people to look for work.
UK disability benefits are not means tested and are paid regardless of whether someone is working. By contrast, social security disability insurance (SSDI) in the US is based on contributions into the system and past earnings.
Sir Keir Starmer has made it a priority to get people on benefits into jobs. However, the spending watchdog warned on Monday that a shortage of work coaches in British job centres risked hindering Labour’s back to work drive.
The National Audit Office (NAO) warned that job centres were struggling to keep up with demand, resulting in many coaches reducing support for people seeking a job.
Liz Kendall, the Work and Pensions Secretary, has put tailored support at the heart of the Government’s back to work drive.
Ms Kendall announced this month that 1,000 work coaches would be deployed to deliver “intensive employment support to sick and disabled people” to help them find a job.
However, the NAO warned there was still a shortfall of 2,100 coaches based on the level of demand. It added that 57pc of jobcentres had reduced their support for claimants between September 2023 and November 2024 because staff could not cope.
Gareth Davies, head of the NAO, said: “Helping people move into and progress in work is crucial to boosting productivity and reducing economic inactivity.
“Given the key role jobcentres will play in supporting the government’s ambition to increase the employment rate, DWP should also be transparent about how effective they are and evaluate the impact of its changes on the system of employment support.”
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